There are pros and cons to buying an established business.
Buying an established business may be a smart choice for some entrepreneurs. There are numerous benefits, such as an established business model, but there are also disadvantages. Making a considered decision is essential.
Buying an established business is a popular alternative to starting up from scratch. Many people choose to sell their business for a variety of reasons; it doesn’t automatically mean the business is in trouble. Some people may simply be looking to move onto another project, are moving too far away to run the business efficiently, or don’t feel they have the skills or experience to take the business any further. There are varying price ranges when it comes to buying an established business. The more successful a business is, and the more potential for further growth, the more expensive it’ll be.
Advantages of buying a business
Unless you have a track record turning round the fortunes of downtrodden businesses, it’s likely the business you buy will be either on the road to success or profitable. In effect, the firm should have everything required for profitable operation from the moment you take the reins, including a reliable income, loyal customers, a host of suppliers and contacts and a track record of supplying quality products or services. Banks are also far more likely to provide finance to an established business than to a start-up. For you, the business owner, it’s a lot easier to run an established business as the first few years of a firm’s existence are often the most stressful and time-consuming.
Disadvantages of buying a business
Buying a business can be much more restrictive than starting your own. Even though you may have ideas about the direction you want to take the company in, these plans may not be compatible with the company’s strategic goals or customer base. Buying an established business is also more expensive than starting your own as you’re also paying for the effort and money already spent on bringing the company to its current state. It’s also very difficult to step into the owner’s shoes and continue the company’s success; some loyal customers or employees may not take kindly to a new boss. There are also substantial hurdles to buying an established business, such as legal compliance.
Before buying a business it’s essential to research the area to ensure it’s the best choice for you. The price must be right, when taking into account any assets the business owns, how profitable it is and how much work needs to be done. Make sure you discover precisely what problems the company has before you buy, and make sure these are reflected in the price. You’ll also need to make sure you have the experience and/or skills necessary to address these problems. Also, you’ll need a very solid business plan for the first year or two after you’ve bought the business. Without knowing where you’re going it will be especially difficult to implement any change efficiently.